US Consumer Confidence Drops in June

From the Financial Times:

Confidence among US consumers dropped in June after two months of building optimism, surprising economists and knocking the wind from stock markets.

The Confidence Board, an industry group, said its index of consumer confidence dropped to 49.3 this month from a revised 54.8 in May. Economists had expected a figure of around 55, but consumers are feeling worse about the current state of the economy and about where they expect it to be in six months’ time.

Confidence built over the spring amid talk of “green shoots” in the economy and a rising stock market, but this month people say business conditions are worse and jobs are becoming harder to find.


20 Responses to “US Consumer Confidence Drops in June”

  1. 1 Nathan Martin June 30, 2009 at 10:04 AM

    Bear with me on this because i’m not sure if it has any validity, but could the problem with finding jobs be attributed to the beginning of the summer months. I know from my own experience that it was harder to find a part time job in the summer due to college students being available to work, in addition could some teachers be seeking extra income during thier vacation months due to the economic situation?

    In addition, one thought that hit me this month was the looming Christmas now only six months in the future. I have already decreased my spending to add to my savings for that occasion, so little Billy can get the bicycle he wants.

    Another thought could be the lack of construction during this summer. I know that in my office we have seen very few proposals going out and even fewer returning, which means that the demand for skilled workers and laborers may have declined even further.

    Nathan Martin

  2. 2 Wen-Li Chan June 30, 2009 at 7:43 PM

    It’s hard not to feel that way after seeing companies file for bankrupcy one by one. My cousin got laid off 2 years ago, found another job last year, and got laid off again few months ago. I keep telling myself it is just part of the normal economic cycle. Once we hit the very bottom, we will start to rise. I still believe the economy will revive soon. With the human capital, physical capital and technological knowledge of the U.S., we see a nation with a lot of potential. Because the nation looks promising, the economy look promising too.

  3. 3 Kit t Kat July 1, 2009 at 11:55 AM

    I understand people are becoming negative due to business conditions and troubles in finding jobs. I heard twice from two different people that about 20 years ago it was easier for them to find a job with the skills they had and small education. Now with the same skills and little education it is much harder to find a job. One woman said Mc Donlads doesn’t even want her. It does seems harder to find a job now than in the past. I know from experience most employers don’t hire people if they have to train them or if the person has little experience. But how can a person get experience if they can’t get hired first. An article I read said people with more education and experience has a better change of getting a job. But with the economy even those people find it difficult. Lastly according to Keynes when positive reigns households and firms increase spending. The result is higher aggregate demand, higher production, and inflationary pressure. And the government can adjust its monetary and fiscal policy in response to optimism and stablize the economy. However some economists argue against active use of monetary and fiscal policy to stablize the economy in the short run.

  4. 4 Dave Stevenson July 1, 2009 at 10:52 PM

    I can’t really speak to the US as a whole, although I am sure there are other states in similar situations, but I know that consumer confidence is getting lower and lower here in CA, partly due to the “legislators” in Sacramento. Nothing sinks consumer confidence more than our friends at the capital that can’t come up with a budget, or any kind of agreement for that matter, and we continue to cut school funding, jobs, hours, benefits, etc. for the state workers.
    How is the average consumer supposed to feel like things are turning around for the better when the cost of everything goes up, and your paychecks get smaller and smaller, if you still get one.
    Those of us in CA, take notice of the folks in Sacramento that aren’t getting it done, and come election time, don’t put them back in office. If I don’t do my job, I don’t get to keep it. Why then should they?

  5. 5 Nick Rood July 2, 2009 at 5:55 PM

    I work in a tasting room in Napa, and I have seen first hand the lack of consumer confidence, even after a small surge in May. With a troubled economy and a slow tourist season it was a rough winter for everyone. What gave us hope was that once tourist season rolled around, we would see an increase in sales. April came along and things looked great for the first time in a while, which rolled over into May. While not the same as years before, we hoped that this trend would continue into the summer and peak during Harvest.

    However, June proved that we are still on a downward slope. Tourist traffic dropped off and even those who came in seemed to be spending less. People keep saying that we need to stimulate the economy to revive it, but for how long? Will a couple months of increased spending create an upward trend? It doesn’t appear so. So how long will it take? Anyone?

    Anyone want to buy some wine?

  6. 6 Hong Truong July 4, 2009 at 10:29 AM

    I doubt that we will be the ones making the choice. We simply will not be able to cash flow the purchases and cover the current account deficit.

  7. 7 Caroline Rice July 6, 2009 at 8:41 PM

    I do not find it surprising that there has been a decline in consumer confidence. Between companies doing layoffs and filing bankruptcies, the future seems more uncertain than ever. Why buy a car with an extended warranty if there will not be a car company to honor the warranty? Why open a new bank account when the bank is likely to be taken over by a larger bank that offers fewer benefits or the bank may need a bailout? I think that there are too many major areas being affected for consumers to sally forth with confidence – house foreclosures; credit card interest rate hikes and balance reductions; car companies failing; people losing their jobs. There seems to be no stable place from which to make a stand, as if the current US economy was founded on sandy loam and the earth is shaking.

  8. 8 Evangelina Alvarez July 7, 2009 at 10:54 AM

    I liked what Nathan stated as possibilities toward our declined confidence. I have seen very little construction, which is really an investment in our economy. What construction I have seen is brand new houses built and no one to live in them. Nobody can afford a brand new house, they’re looking at a little older houses that are actually affordable. For about 1 year now there are probably 3 houses right off of Trower, all side by side just empty. Is it a surprise that were not to confident, look what our markets are showing us.

  9. 9 wongt July 7, 2009 at 11:54 PM

    I agree with Dave Stevenson on this one. The legislators in California just cannot find a way to agree on things and the cuts on school, jobs, hours, and benefits for state workers continue to happen.
    The average consumer still feels the effects of this downed economy with the high prices and dwindling hours and smaller paychecks. How is consumer confidence supposed to improve with all this happening and the never ending bad news?

  10. 10 Tanisha/ Econ 100 July 9, 2009 at 11:19 AM

    It makes no since for anybody to get their hopes up right now. The economy is so bad, it’s always subject to change. It’s great that the confidence level was high in May, but look at it now. We just need to monitor it. Only the wealthy can shop with “confidence” everybody else is pinching pennies. Jobs are hard to find and without one of coarse the confidence level is going to drop. What is there to be happy about? What is there to spend?

  11. 11 Carolyne Abrams July 10, 2009 at 3:29 PM

    That was really a bummer to read that the consumer confidence level is down. Summer does bring about much more activity, outings and overall spending. People go out to dinner more and spend less time cooped up in the house. Spending throughout the year is cyclical and I think the country was getting excited in hopes of people opening up their pocketbooks.

    Unfortunately the only increase in spending it the consistent raise in gasoline prices, utilities and the cost of living. Unemployment rates continue to increase, housing market is still awful, and people are getting sick of it. The family vacations are getting cut short, if anything at all and we are all realizing that it will take much more that some sunshine from the summer to get us out of this disasterous mess.

  12. 12 Matthew Davis July 12, 2009 at 8:25 AM

    As the jobless rate continues to climb, consumer spending continues to decline. Our nations economy is still reeling and is a long ways from full recovery. The latest stock market rally is a “false rally.” There is nothing substantial behind the summer rally, and eventually the market will continue to decline until banks begin to loan again, the jobless rate declines, and consumer spending increases.

    My profession is directly related to the commercial building industry, and I can tell you that our industry is significantly struggling. 80% of the commercial buildings I drive past, are vacant, and have been for 5-6 month. Businesses are having cash flow problems, and thus are needing to declare chapter 11, leading to an increase in commercial vacancies. Until the banking institutions decide to loan money again, our nation’s economy we continue to decline. The Obama bucks are helping (i.e.: new construction etc), but the banking institutions are the key to our future success.

  13. 13 Sara Tirado July 13, 2009 at 8:25 PM

    I cannot say I am surprised that consumer confidence has dropped. With the fiscal year comming to an end, businesses have to prepare for a new budget this year and lots of employees have been laid off or at least were notified of an impending lay-off of workers. Unemployment and/or fear of unemployment has caused most of the decline in consumer spending.

  14. 14 Amanda Smith July 24, 2009 at 1:58 PM

    I do agree that a lot of the consumer-spending has declined because of unemployment and fear of unemployment. Which in turn leads to more savings. In times like these, it seems much smarter to save your money rather than spend it. However, more savings leads to less consuming; and less consuming leads to suffering firms and industries. And when firms are suffering losses, they fire people. Which in turn scares people even more into saving their money. It’s a huge circle that’s going on right now. We need to start spending, but spending wisely.

  15. 15 Sanamjit Bains July 29, 2009 at 10:45 PM

    It will a longer time for the confidence to build than a couple of months. Unless there is a significant change in the economic condition through government help, change in policies and more job opportunities, people will hold on to their money more tightly.

  16. 16 Jessica Tsai August 2, 2009 at 4:54 PM

    It is only natural for consumer confidence to fall when times have been tough for extended periods. We hear negative attributes of the economy on the news daily and when these negativities begin to affect our lives significantly, for example, preventing us from getting a job necessary for supporting a family, we will attempt to save in every aspect in order to adapt. Fear of unemployment has become a very real issue and many are scared of it getting too close for comfort. Despite the recent fall in consumer confidence, as we begin to adapt to the recession, there are still purchases that are necessary and over time, this will begin to show in certain areas of sales.

  17. 17 Abby August 3, 2009 at 6:18 PM

    As our economy is essentially weak across the board, inevitably the first thing that people cut is consumer spending. As people are laid off and can’t find jobs despite great efforts,the stock markets plummet, and historic corporations file for bankruptcy, buying extra stuff at the mall becomes: a. superfluous, b. viewed as excessive, and c. one thing that an individual can control. Aside from the frowned-upon pretension of spending money on material goods in a recession, cutting back on consumer spending is one of the few aspects of an American’s personal economic stability that he can control. Jobs, the stock market, federal & state budgets, and CEO’s decisions are ultimately out of our hands. Yet, cutting coupons and cutting back on spending are ways that Americans can effectively and directly deal with the recession, hurting our confidence but raising our awareness.

    Furthermore, the constant bombardment of dramatic negativity from the media (in everything from the Economist to Elle), deeply affects Americans’ demeanor towards the recession. I do not suggest sugar-coated new stories, but the apocalyptic-style news coverage definitely hasn’t helped our confidence…

  18. 18 Alejandro Cortez August 3, 2009 at 10:32 PM

    Consumer confidence was low in the month of May and we should not be surprised. Every summer, without fail, prices go up. Gas, hotel rooms, concert tickets, and airfare prices all shoot up dramatically. So it is no surprise that when our country is facing rising unemployment, consumers have less confidence heading into a time of the year when prices start increasing. Families with kids who are on vacation are probably thinking twice about lengthy trips to the beach, or flights to Florida, or even visits to the Winey Country. We will see consumer confidence rise when the unemployment percentage starts to decrease and when the economy shows signs of stabilizing in major sectors.

  19. 19 Joseph Garcia August 4, 2009 at 12:06 AM

    Yes, Alejandro I’m one of the people that did not go vacation. Instead of enjoying the beaches of Hawaii, I’m here typing away for this online class and taking others as well. Although this article is a month old, I personally think that consumer confidence has risen a bit since then. With the recent gains Ford made with the “Cash for Clunkers” deal, more people can actually buy newer, more fuel-efficient cars. It just goes to show that demand in the long-term for gas really is inelastic!

  20. 20 Patrick Powers August 6, 2009 at 3:34 PM

    Well its not surprise that jobs are hard to find during the summer months, as newly graduates as well as other students are looking for jobs and internships to make some money and experience all at the same time. Major layoffs too have fun the start of the summer, as the summer is not really the heat of the business industry season. And about the confidence dropping during the month of June, what did people expect? Did they really think a good May would turn around everything?

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